THE Life Insurance Contract

Need for a Valid Offer and Acceptance: The client initiates the insurance process by submitting the application. The insurance company decides whether it will offer the policy to the client and what premium will it require. The client has the option of accepting or declining the offer.

Legal Capacity of all parties: The policy owner has to be 16 years of age, must have the mental capacity to understand and carry out the terms and conditions of the contract. Neither parties can have judgement impaired by drugs or alcohol.

Mutual Intent: Both parties must intend to fulfill the terms and conditions of the insurance contract. In case of any false statements, the contracts can get not enforceable.

Unique features of Insurance Contracts

Unilateral Contracts

An insurance contract is unilateral, because only the insured is bound by the contract. While the insured must fulfill the terms of the policy if the policy owner pays the premiums, the policy owner is not obligated to pay the premiums. Most other contracts are bilateral, where both parties are bound by the contract.

Contract of adhesion

An insurance contract is a contract of adhesion, because only one party, the insurer, sets the terms of the contract. Most other contracts are bargaining contracts, which allow either party to negotiate the contract terms.

Aleatory Contract

This means that a contractual obligation depends on an uncertain event, so that one party offers the other party consideration, in return for a conditional promise to make a payment or perform a service but only if a specific event occurs.

When one has a history of health issues like diabetes etc. etc., there could be a strong possibility of being approved only for sub-standard rates or even get declined. The insurance company will not qualify you, under those circumstances, for preferred rates. So, the advise is, please do not get tempted if someone tells you that you could get a preferred or an elite rate. Give it a thought before applying for life insurance. It might even be useful to first apply for a non-medical life insurance plan and have that in your bag.

These are actually discounted rates that reduce your insurance rates from standard rates. People get entitled to these rates upon having a very good health and also a clear family medical history. The underwriting process in tha application stage identifies whether the rates are standard, preferred or elite. Some insurance companies apply preferred and elite rates, upon approval, only beyond certain face amounts, i.e $applied only beyond $200,000.00 of coverage.